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Defined: What is a Multiple Employer Welfare Arrangement (MEWA)?

Defined: What is a Multiple Employer Welfare Arrangement (MEWA)?

As employers prepare for open enrollment and begin planning recruitment strategies, it is crucial for teams to recognize how they can best maximize their health plan and benefits packages. For some employers, a multiple employer welfare arrangement (MEWA) can help. Discover how small to mid-sized organizations can boost employee retention with this approach. 

 

What is a MEWA?

The Multiple Employer Welfare Arrangement (MEWA) is an arrangement in which groups of two or more small employers pool their resources to provide healthcare and other benefits to employees. 

This self-insurance strategy, which falls under the Employee Retirement Income Security Act (ERISA), gained popularity following the passage of the Affordable Care Act (ACA). This is in part because they provide a way for many employers to reduce group healthcare costs and offer better benefits packages to their employees.

 

What Is the Difference Between an MET and a MEWA?

The primary difference between an MET (Multiple Employer Trust) and a MEWA is that a MEWA is subject to all of the requirements set down by the Employee Retirement Income Security Act of 1974 otherwise known as ERISA. An MET is primarily reserved for smaller businesses whereas a MEWA will have a minimum of 25 employees. 

 

Effects of The Potential Form 5500 Amendments on MEWA’s

The Department of Treasury, The Department of Labor, and the Pension Benefit Guaranty Corporation have jointly proposed a series of amendments to Form 5500. In short these proposals are intended to implement changes to the SECURE Act.

These changes would require any MEWA’s offering medical coverage to disclose the participating employers within the MEWA. The employers would then need to be listed in the Form M-1. Some MEWA’s may even be required to disclose an employer's estimated contribution amount. 

 

Can MEWA’s be Self-Insured?

So long as they do not conflict with ERISA, then a state may permit and subject requirements on the self insured MEWA’s. The MEWA must abide by state laws and regulations as well as ERISA, however they can be different regulations than that of ERISA. If an MEWA abides by both ERISA and state regulation, then it will be permitted. 

 

Pros of MEWAs

MEWAs can effectively "level the playing field" for employers who are smaller and looking to compete for top talent in the employment marketplace. However, if the MEWA is not a good fit, then a number of issues can arise. Consider the following:

PROS

CONS

Competitive rates

Insufficient funding and inadequate reserves

Rating methodology similar to pre-ACA rating

Reliance on a single medical group or health clinic 

Predictable, fixed monthly payments

Lack of stability

Protection of being part of a larger self-funded pool, thereby sharing risk among multiple employers

Unlike single-employer plans, MEWAs are often subject to additional regulations under the Employee Retirement Income Security Act (ERISA)

Flexibility in choice of benefit plans

 

 

What Else Should Employers Know About MEWAs?

There are numerous factors affecting the rates being applied to an organization's MEWA. Understanding the medical history, gender, age, and location of employees will provide insight on how much time and energy an organization should spend pursuing MEWA strategies.

 

Important Considerations In Choosing a TPA

Before discerning whether or not a MEWA is the right approach for your organization, it is advisable to consider working with a TPA or vendor. These valuable partners should be able to administer a plan that your members are familiar with as well as offer good plan options. This can include traditional plans, such as high deductible and HSA plans, as well as different levels of coinsurance and strong pharmacy and benefit plans. 

Here are other considerations when choosing a TPA:

  • Ancillary Lines: Which lines are offered in comparison to what you need?
  • Web Tools: Can they print ID cards or is it only claims process management? Make sure you know exactly which responsibilities your TPA will take on.
  • Wellness Plans: Is my TPA involved in the wellness of my employees or the interests of the carrier? When choosing a TPA, be sure that TPA works to keep costs down. 
  • 1094-Bs: Does my TPA provide 1094-Bs or will I need to do that myself?
  • Data Flow: What data do I communicate to whom? How do I get my information from point A to point B?

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